If yours is like most young start-ups, the Internet is key to
your company's expansion. As your business grows, you add
employees. And chances are, those employees will spend a lot of
their time online.

But exactly what are they doing online? You might be
unpleasantly surprised to find out. Sixty-two percent of companies
say their employees have used the Internet to eyeball porn sites,
according to research from Elron Software Inc., a Burlington,
Massachusetts, developer of Internet filtering software.

In fact, more than 25 percent of the time employees spend online
is not work-related, says Phil Lumish, a vice president at JSB
Corp., a Scots Valley, California, developer of surfCONTROL, an
Internet monitoring tool. That's a huge productivity sinkhole,
and it's costing you big money- computers, Net
connections and payroll. Internet usage has become a productivity
issue, as too many employees waste too many hours checking sports
scores, ogling sex sites and swapping personal e-mail.

As for other ways employee Internet usage can cause problems for
your business, Larry Walraven, a lawyer in the Newport Beach,
California, office of O'Melveny & Myers LLP, ticks off a
few cyber-potholes:

"Viewing porn sites could be construed as creating a
hostile work environment," Walraven says. Other employees
could file sexual harassment claims. In addition, distribution of
jokes about specific groups, from women to African Americans or
Asians, is no laughing matter, especially if workers file
complaints.

"An employee's opinion- a chat room or
e-mail- be construed as the company's," says
Walraven. The usual form of an e-mail address is name@company.com.
If one of your employees circulates messages badmouthing customers
or competitors, that opinion could be seen as the
company's.

"If an employee downloads unlicensed software and
distributes it, that could be a copyright violation," says
Walraven. Another possible violation: downloading copyrighted
material and distributing it via e-mail.

You can't rip out their modems- need e-mail and the
Net for work. But that doesn't mean you have to suffer abuses
passively. The solution? Establish an Internet policy. "This
discourages Internet usage you don't want and helps protect you
from liability," says Gregory A. Miller, an attorney with
Buchanan Ingersoll in Pittsburgh.

Another plus: "A written policy can help you avoid lawsuits
for firing employees for [Internet abuse]," says Mark
Thibodeaux, director of IT compliance at Enron Corp. in
Houston.

"Start by putting out an e-mail policy, then expand it to
include the Web," suggests Marcelo Halpern, an attorney with
Gordon & Glickson LLC in Chicago. More litigation is triggered
by inappropriate e-mail than by viewing Web pages, making it a
natural first target.

Should you ban use of company computers for personal e-mail? In
a survey by the Society for Human Resource Management, only 25
percent of companies explicitly allowed nonbusiness use of company
e-mail. However, most don't monitor employee use, and,
generally, experts see no harm in allowing some personal e-mail.
The big exceptions: mail that's derogatory, obscene or
harassing; illegal mail, such as football pools or chain letters;
and unauthorized use of your company's name, says Walraven.
Your policy should forbid all that and also keep employees off
porn, hate-group or other potentially lawsuit-inducing sites, and
limit visits to sites not related to work.

And shopping online? Most experts advise permitting it in
moderation: It saves employees time and can increase productivity.
They'll respect you for respecting them.

The key: "Tell employees you expect them to behave
responsibly and that the technology is in place to serve business,
not personal, needs," says Thibodeaux.

Should you install software to monitor Internet usage? Well, if
a written policy doesn't minimize abuse and you do decide to
install tracking software, "Tell employees," says
Walraven. "Otherwise, when they find out, it will be seen as
an invasion of privacy."

Legal Ease

Get detailed legal info on setting up your very own Internet
usage policy at law firm Gordon & Glickson LLC's Web site
(www.ggtech.com). Well-written,
informative (and free) papers are available on "Setting
Boundaries on Employee Internet Use" and "Information
Technology Strategic Survey of Legal and Business Issues."